Atradius predicts further disruption to India manufacturing

India’s economy is forecast to continue its economic growth in 2022, having rebounded by 8.2% in 2021 after a severe 7.0% contraction in 2020. But downside risks remain, according to Atradius, due to the spread of the Omicron variant.

Despite government efforts to complete the rollout by 2021, only 64% of India’s adult population was fully vaccinated by December 31. The country’s continued economic growth will rely heavily on the success of the vaccine rollout to its remaining unvaccinated population.

Disruptions in manufacturing persist, with the capacity utilisation rate still 20 percentage points below optimal level. Atradius reports credit risk is high in the textiles, paper and machinery/engineering sectors and business performance is below long-term trends.

This is partly due to labour shortages and India’s strained relationship with China, impacting industries heavily dependent on imports such as consumer durables and machinery. 

Damien Dawson, regional manager for Atradius UK, said: “India has made an incredible economic recovery since 2020 and the outlook across many sectors is promising. However, businesses must ensure they proceed with caution.

“The increase in activity following the easing of restrictions is set to drive growth in domestic demand over the next year, leading to a rise in imports. This increase, alongside recent disruption to supply chains and an increase in input prices, presents an opportunity for exporters.”

“Strategic planning and comprehensive trade credit insurance continue to be vital when entering new trade markets or maintaining good trade relations.”